David Cameron should set out a powerful Conservative case for smaller
government and low taxes.

Nick Clegg, the Deputy Prime Minister, won plaudits this week for proposing that planned tax cuts for low and middle earners should be accelerated. The Lib Dem leader was less than specific about how this policy would be funded, but he evidently wants to pay for it by increasing taxes on the better off. This approach would sustain the current level of central state spending, which this year will total around £700 billion.

The notion that the Government might fundamentally reorganise the way it does things in order to spend substantially less of our money and thereby take less tax seems not to have entered Mr Clegg’s thinking. This is an attitude that pervades the public sector. In an interview with this newspaper yesterday, Dave Hartnett, Britain’s most senior taxman, said that paying cash in hand to tradesmen, who then fail to pay their VAT, amounted to “diddling the country”. But if the country is being diddled, it is by the state, not the people.

As so often, Adam Smith, the 18th-century Scottish economist and champion of the free market, put it best. He said: “It is the highest impertinence and presumption in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense… They are themselves always, and without exception, the greatest spendthrifts in the society.” This was true then and it is true now. Modern politicians assume that a significant proportion of what we earn is for the state to take and dispose of as it sees fit, when they should instead be justifying every penny that is raised – whether from the wealthy or the poor.

To maintain that lower earners are always hard working while the better off are rapacious is to introduce a false dichotomy in order to hide the real issue: that the state spends too much. Even after a significant fall in national wealth over the past few years and a general understanding that we cannot simply go on as before, the Government wants to keep the expenditure pie at the same size while arguing over who should pay for it.

Before the last election, we had reason to hope that a Conservative government would challenge the status quo, make the case for low taxation, and display a desire for smaller government and for greater personal freedom. But the Tories failed to win outright, and consequently entered into coalition with a party that, despite its name, does not share the old Liberal belief in small government. This newspaper has supported the Coalition because the Government’s most important task has been to restore credibility to the national finances, something George Osborne has achieved, albeit without making much of a dent in borrowing. But the imperative now is for growth – and the compromises required of coalition politics appear to be holding back the more radical thinking that is needed.

At least Mr Clegg’s speech had one particular merit, in that it tried to move the political debate back to the issue of tax and away from narrow arguments over bankers’ bonuses. As has been witnessed in America – where GDP figures yesterday showed growth accelerating – and EU countries such as Sweden and Estonia, lower taxes act as an economic stimulus. They allow people to make their own decisions, to save when they wish, to give if they choose and to spend on what matters to them. By the same token, lower spending forces politicians to rethink how the state uses money and where. High taxation removes the need for individuals to take responsibility for their own lives and heightens cynicism about the ability of the government to deliver. The state does not necessarily know best when it comes to taking decisions.

Conservatives should not resile from talking about this subject on moral as well as practical grounds. We understand why Mr Clegg, whose party is riding low in the polls, wanted to make a speech that differentiated it from the Tories and challenged Labour’s claim to represent the interests of the less well-off. But this also gives David Cameron the latitude to set out a powerful Conservative case for smaller government and low taxes. Perhaps if he did so, people would no longer feel justified trying to “diddle” the Exchequer.